SANDAG to buy bankrupt South Bay Expressway?

Motorist travel northbound on the South Bay Expressway Toll Road, also known as state Route 125. The company that built and operates San Diego County's lone private toll road filed for Chapter 11 bankruptcy protection in March 2010.

Nelvin C. Cepeda

Motorist travel northbound on the South Bay Expressway Toll Road, also known as state Route 125. The company that built and operates San Diego County's lone private toll road filed for Chapter 11 bankruptcy protection in March 2010.

Motorist travel northbound on the South Bay Expressway Toll Road, also known as state Route 125. The company that built and operates San Diego County's lone private toll road filed for Chapter 11 bankruptcy protection in March 2010. (Nelvin C. Cepeda)

The regional agency San Diego County Association of Governments is negotiating to purchase the bankrupt South Bay Expressway, the privately owned toll road in South County.

In a closed session on Friday, the SANDAG board of directors, in an 18-0 vote, directed the agency to pursue the 9-mile road that extends south from State Route 54 to Otay Mesa Road. Chula Vista Mayor Cheryl Cox, a board member, made the motion. South Bay Expressway is mostly in her city.

Cox said Wednesday she would like to see the road in public hands and, some day, toll-free. “I said in my State of City address that I thought the shift of a tollway to a freeway would be the most dramatic economic catalyst for all of South Bay,” she said.

SANDAG executive director Gary Gallegos said the agency has delivered a letter of interest to South Bay officials.

The company that owns the road, South Bay Expressway LP, is in court Thursday for what CEO Greg Hulsizer hopes is approval of a plan to emerge from bankruptcy. The plan would still require approval of its creditors.

Hulsizer has said before that there are others interested in buying the highway and he expects potential buyers to “approach us at the appropriate time. Until then the focus is on emerging from bankruptcy.”

SANDAG officials have talked about buying the road since last fall. Gallegos said that any deal would be negotiated privately then brought to the board, after which it would be subject to public hearings before final approval.

Gallegos says the toll road, which opened in 2007 and immediately fell into financial difficulty, is seen as a “strategic facility for San Diego County ... The road has lots of unused capacity in an area with a lot of future growth.” He noted that there are plans for a new university not far from the road and that a third border port of entry is planned several miles to the east of the road’s southern end.

South Bay Expressway is one of only two roads in California built under a program that paired public and private funding with private operation. The other was SR-91 in Orange County, which is now publicly owned.

The Australia-based Maquarie Group Ltd. was to finance and manage construction then operate the toll road for 35 years before turning the lease over to the state. South Bay Expressway, however, faced a difficult birth. There were years of development and prolonged environmental mitigation negotiations.

When it finally opened well behind schedule the economic recession of 2008 was upon us.

Ridership and revenues have fallen far short of target goals. However, Hulsizer has pointed out that the toll l road has met its operational expenses and even recorded surpluses since the debt was separated into Chapter 11 litigation.

Users of the road have not been affected by the bankruptcy, said Hulsizer.

Should the South Bay Expressway be bought by SANDAG, Cox says the issue of whether it remains a toll road is up in the air.

“Let’s just anticipate that a purchase price is negotiated,” she said. “Next issue is, what do the tolls need to be to pay back the funds that SANDAG used to purchase the road and ultimately turn it into a freeway?”

A lower toll on the expressway, she speculated, would draw traffic from I-805 and possibly reduce the need for additional lanes currently in the planning stages.

But all that, said Cox, is for discussion after the road is acquired, or if it is acquired. “We haven’t had that discussion yet, because we’re just doing it one thing at a time,” she said.